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Shell Taking Half-Stake in Nautilus for Growing Permian NatGas Volumes

With an eye on its long-term plans in the Permian Basin, a Royal Dutch Shell plc unit has exercised an option to purchase a half-stake in the Nautilus natural gas gathering system in the Permian Basin, which gathers most of the supermajor’s gas output in the Delaware sub-basin.

Shell unit SWEPI LP last September secured a long-term agreement with Crestwood Equity Partners LP to construct, own and operate the gas system. Nautilus was created through Crestwood Permian Basin Holdings LLC (CPJV), a 50-50 joint venture with First Reserve and Houston-based Crestwood, which operates the system.

Nautilus is gathering most of Shell’s Delaware gas under a 20-year tiered, fixed-fee contract.

“The partnership with Shell Midstream will further align CPJV’s and Shell’s long-term interests in the Delaware Basin and we look forward to a long partnership,” Crestwood CEO Robert Phillips said.

Shell is taking the stake in Nautilus through Shell Midstream Partners LP. Financial details were not disclosed for the transaction, which should be completed by the end of the year.

The Nautilus system, which began flowing natural gas in June, includes 20 receipt point meters, 60 miles of pipeline, a 24-mile high-pressure header system, 10,800 hp of compression and a high-pressure delivery point.

Nautilus is designed to serve a dedication area of about 100,000 acres in West Texas across Loving, Reeves and Ward counties. Ultimately the system is expected to run 194 miles using low-pressure gathering lines, 36 miles of high-pressure trunklines and centralized compression facilities. Nautilus is expandable as production increases, providing a minimum gathering capacity of 250 MMcf/d.

CPJV has more Permian gas takeaway plans underway. Under a two-part plan announced in May, the partnership brought Crestwood's gas processing unit, Willow Lake, into the CPJV. Willow Lake is in Eddy County, NM. The partners also plan to build a 200 MMcf/d cryogenic gas processing plant near Orla, TX to connect to Willow Lake with the Orla Express Pipeline, a 33-mile, 20-inch diameter high pressure line.

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